What is secured loan and how to get it??

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally lent to the borrower, for example, foreclosure of a home. From the creditor's perspective this is a category of debt in which a lender has been granted a portion of the bundle of rights to specified property. If the sale of the collateral does not raise enough money to pay off the debt, the creditor can often obtain a deficiency judgment against the borrower for the remaining amount. The opposite of secured debt/loan is unsecured debt, which is not connected to any specific piece of property and instead the creditor may only satisfy the debt against the borrower rather than the borrower's collateral and the borrower.
Available through regular banks, specialized financial institutions and online lenders, a secured personal loan is one in which the borrower offers collateral to the lender in exchange for a loan at a lowered interest rate. To get a secured personal loan, you'll need to present proof of your monthly income and a valuable asset you can use as collateral.

Purpose

There are two purposes for a loan secured by debt. In the first purpose, by extending the loan through securing the debt, the creditor is relieved of most of the financial risks involved because it allows the creditor to take the property in the event that the debt is not properly repaid. In exchange, this permits the second purpose where the debtors may receive loans on more favorable terms than that available for unsecured debt, or to be extended credit under circumstances when credit under terms of unsecured debt would not be extended at all. The creditor may offer a loan with attractive interest rates and repayment periods for the secured debt.

Types

• A mortgage loan is a secured loan in which the collateral is property, such as a home.
• A nonrecourse loan is a secured loan where the collateral is the only security or claim the creditor has against the borrower, and the creditor has no further recourse against the borrower for any deficiency remaining after foreclosure against the property.
• A foreclosure is a legal process in which mortgaged property is sold to pay the debt of the defaulting borrower.
• A repossession is a process in which property, such as a car, is taken back by the creditor when the borrower does not make payments due on the property. Depending on the jurisdiction, it may or may not require a court order.

Things You'll Need:

• Good credit
• Documentation of monthly income and secured employment
• Asset(s) to use as collateral

Instructions

1. Determine how much money you need to borrow. You'll need to offer up collateral valuable enough to cover the balance of the loan. Only borrow what you need, since you'll be paying significant interest on the balance of the loan.
   
   
2. Make a list of assets you might use as collateral. These include any items of value that you own outright, such as a car or boat, but you might also be able to use major assets you're still paying off, such as real estate. Other assets, such as cash investments, may also qualify to be used as collateral.
   
   
3. Make an appointment to speak to a loan officer at your regular bank. You'll have the best chance at getting good loan terms from a financial institution where you've been a long-standing customer.
   
   
4. Seek alternative sources for a secured loan if you're unhappy with the terms being offered by your bank. There are a growing number of alternatives available to borrowers, both online and through non-traditional financial institutions, such as wholesale banking companies.
   
   
5. Remember that the annual percentage rate (APR) is but one of many important considerations you face when comparing loan terms. You'll want to know the length of the repayment term (shorter is better), and make sure you understand any additional fees that apply as well as any penalties that are attached to late or missed payments.
   
   
6. Negotiate the interest rate down. Since you're offering collateral, you're in a position to demand better terms from the lender. If you're dealing with your regular bank, you might even get a reduced interest rate if you agree to have the monthly payments come directly out of your account.
   
   
7. Sign over your collateral when you sign the loan documents. Check to make sure all terms appear on the documents as per your oral agreement with the lender.
 

Tips & Warnings

• Some lenders will allow you to use stocks, bonds and other investments as collateral. The advantage of structuring your loan this way is that you can continue to earn money on your investments while simultaneously permitting the bank or lender to hold them as collateral.
• You might be able to use the item you purchase using the loan money as the collateral. For example, some lenders may let you use the new car you buy as the collateral on the loan. However, this strategy puts you in double jeopardy if you default.
• Late or missed payments on a secured loan will lower your credit score. You also risk losing your collateral to the lender if you default on the repayment terms.